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The Actuary The magazine of the Institute & Faculty of Actuaries
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Crowding glory

Steven Mendel is leading the way in harnessing the powers of social networks and big data to shake up the insurance industry. The actuary turned ‘social insurance’ trailblazer shares his story with Richard Purcell and Gemma Gregson

04 DECEMBER 2014 | RICHARD PURCELL AND GEMMA GREGSON


Steven Mendel

Mendel is not your conventional actuary. So it seemed fitting that our meeting with him was a little out of the ordinary too. Making the most of the unusually warm October weather, he invited us up to the rooftop gardens of his office in Farringdon. Basking in the autumn sunshine, he spoke to us about his early career as an actuary, his former roles at Close Brothers, Barclays Wealth and Christie’s, and the start-up of his latest venture, the pioneering online insurance resource, Bought By Many. Mendel also outlined his ambitions for the company, and offered some tips for aspiring entrepreneurs.

We need to be bold and hire people that work in a different way to us and have different skills

You have had an interesting and varied career, but you started out as a more ‘traditional’ actuary. Can you tell us how it all started? 

It was an article in The Sunday Times about being an actuary that first caught my attention when I was just 14 years old. 

So when I was a bit older I did a summer internship at an actuarial firm, Duncan C Fraser, which is now part of Mercer. I found that I enjoyed it and so decided to do maths at university. When I graduated I then found an actuarial position in pensions at Clay & Partners, now part of Aon Hewitt.


You have worked in strategy consulting, banking and art financing. What took you into these different roles?

At Aon we saw an opportunity to offer asset-based advice to pension funds worth tens to hundreds of millions of pounds, a segment of the market that we thought was not really being catered for. I led the newly created function and it was this experience that opened my eyes to the different possibilities out there. 

After a time I considered an MBA. But one piece of advice I was given was that it’s better to get some first-hand experience if you can. So I ended up joining McKinsey. It gave me great exposure and I travelled lots.

Ultimately I thought consulting wasn’t what I wanted to be doing in the long term, so after a spell as a director at Barclays Wealth, I got involved with setting up an art finance business for Christie’s. Basically, we were focused on any form of finance centred on art, whether it was insuring art works or helping people looking to borrow against pieces of art. It was an interesting time and unusually I found the wealthier the clients got, the more I dealt with them. That’s probably the opposite of the corporate world, where the wealthier people become, the more they are surrounded by advisers. I think that’s due to art being a real passion for such clients, and it meant I met some really interesting people along the way.


After a time at Close Brothers you then decided to go into business for yourself. What led you to set up Bought By Many?

I looked at the insurance industry and thought that there has been no real innovation for a long time. My grandfather was a door-to-door salesman for Pearl for more than 40 years and when you think about it we are still buying largely the same products today. Not only has the industry not innovated but it’s also not good at putting the customer first or at using data effectively. If you think about your experience with retailers, we now expect them to use what they know about us to provide more discounts or offers relevant to us. I think there is an opportunity to use data more smartly in the insurance industry.


Can you tell us about the Bought By Many business model?

We help people to find insurance that they can’t get on their own, or to negotiate a lower price. We do this by pooling similar people or risks together. If, for example, you have a pug as a pet, then getting pet insurance for this breed of dog can be expensive because of the high risk of theft associated with this breed. However, by grouping similar risks together, an insurer can more effectively underwrite and manage the risk, so it can provide insurance at a lower cost to the consumer. We can also use this approach to identify demand for insurance products that may not even exist today.


Do customers come to you or do you find them?

We find it’s a bit of both. Using our own analysis of internet search data and social media groups we uncover pools of demand for different things, for example, student gadget insurance. So using this information we may set up groups which people will then come across when searching online. Some customers also set up their own groups. 

Providing the groups are large enough, we then pair them up with insurers who then can offer better terms than they could to individuals.


Does this model appeal to customers and insurers?

We have seen a lot of interest from potential customers since we started in 2012, with about 35,000 members registered on our site and about 5,000 new members every month. We are also working with an increasing number of insurers as they see the value of being able to find specific groups of risk to write on their books. For them, it can be a distribution channel and a risk management tool.


Where do you see the business in five years?

I hope that we will have grown the scale of the business. Not just in the UK, but also operating in international markets, offering a wider range of insurance. I also hope we can form a market place for insurers to ‘buy risk’. Where we can’t find ways of filling the demand from the various groups by working with traditional insurers, we may consider trying to insure them ourselves.


Why do you think insurers don’t operate like this themselves?

With traditional insurers there is a real nervousness to change, and a fear of the unknown and getting things wrong. Recruitment is an issue. We are not trained to recruit, so we tend to just hire people ‘similar’ to us in the way we think. This makes for a lack of diversity of thought within the industry. We need to be bold and hire people that work in a different way to us and have different skills.


Would you say that your actuarial skills have come in useful when setting up Bought By Many? 

It’s difficult to differentiate between my actuarial grounding and my experience as a management consultant at McKinsey. 

For example, my time at McKinsey helped hone my skills in being able to simplify complex problems. However, being an actuary certainly gives you the training to think through problems logically. I’ve also found being an actuary opens doors – it gives you the permission and authority to talk about insurance with some people, and that has been important when talking to insurers about what we are doing here at Bought By Many. 


What would be your tip to anyone thinking about starting their own business?

Setting up your own business is really, really hard so you have to really want to do it. There are a lot of logistical hurdles to overcome; even setting up a bank account for a new business can be difficult. Plus there are the financial pressures it can create. But it can be very rewarding. In order to be successful I think you need persistence and the experience to harness the opportunities that are presented to you.